Effect of Corporate Sustainability Policies and Investment Risks for Future Arctic Oil and Gas Development in Alaska Olivia Lee
The feasibility of new Arctic oil and gas development activity is strongly tied to global supply and demand. The evolution of oil development in Alaska represents responses to external pressures such as economic viability, and changes in domestic and foreign oil production. Climate change is another external pressure that affects the cost of developing Arctic oil and gas. Direct impacts can occur from improved access routes for ships in ice-free waters, or increased costs from infrastructure damage due to permafrost thaw or coastal inundation. An emerging globally-driven factor that may limit future oil and gas activity in the Arctic is the recent trend in corporate sustainability goals driven by social responsibility to mitigate climate change. In 2020 several major US banks expressed policies that would prohibit financing of Arctic oil and gas exploration or development. The extent that such corporate policies could impact future oil development in Alaska is explored in the context of changing regulatory environments, and the diversity of oil companies invested in Alaska. Indicators on company interests are used to assess threats for future Alaska oil and gas development. The results emphasize that financing challenges would make it difficult for smaller companies to share the investment risk in Arctic oil exploration and development. Comparisons of oil and gas investments in other Arctic states show that the strength of state-backed oil and gas companies, investments from Asia, and access to technology innovations are important factors that may offset the effects of more limited Arctic oil and gas financing by major US and European banks.
Introduction Increasing access to the Arctic and its resources could draw potentially significant investments to the region from non-Arctic states. While physical models provide scenarios of Arctic sea ice loss (Wang & Overland, 2009; 2012) and facilitate the development of models on increasing ship traffic (Smith & Stephenson, 2013), or improved access to marine and coastal resources, predicting the effects of global economic drivers on Arctic development remain a challenge. New developments in the oil and gas sector is of particular interest in the Arctic because of large estimates of oil and
Olivia Lee is an Assistant Professor at the International Arctic Research Center, University of Alaska Fairbanks.
